The Business Council opposes this legislation that would mandate that automobile manufacturers make significant and unwarranted payments to auto dealers if a used motor vehicle is prohibited from sale due to a stop drive order related to a recall. This bill has the potential to negatively impact manufacturers, consumers and ultimately New York State.
Auto manufacturers voluntarily support their dealers in a number of ways to ensure that customers have the best sales and service experience.However, this bill is based on the incorrect notion that a state law is needed to compel payments to dealers or else they will suffer grave financial harm – a notion that is not supported by historical facts in the industry and has not been substantiated by any actual current data.
Specifically, this legislation would mandate that manufacturers compensate dealers at a monthly rate of as much as 2% (an annualized rate of 24%) of the value of a used motor vehicle as determined by the average “trade-in” value for a similar used vehicle, for as long as the dealer is unable to sell, offer to sell, or repair such vehicle due to the inability to satisfy any recall issues.
Most automobile manufacturers already have voluntary implemented programs to help dealers cover practical expenses which may be associated with recalls affecting used vehicles in the dealer’s inventory. This legislation is the classic example of creating an answer to solve a problem that does not exist. The cost of this legislation will ultimately be paid for by consumers, with the main outcome of simply increasing revenue to dealers.
It is bad public policy for state law to interfere with contracts entered into by private businesses. Additionally, this bill will unintentionally send a message to all current and future manufacturers that New York is hostile to business growth. Based on consumer demand and technological advances, the automobile industry is ever-changing and should not be obstructed by protectionist state laws that ultimately harm consumers.
For these reasons, The Business Council opposes adoption of S.7545 / A.8268-A.